A Primer on Trusts for Estate Planning

 Posted on March 28, 2019 in Estate Planning

Even if you do not know how to write one that is valid, you probably know what a will is. Or, maybe you are more familiar with the longer name of a “Last Will and Testament.” There is a good chance that you know that most people create a will to direct how their property will handed down to the next generation after they die. You may also have heard of trusts, but you may be unsure as what a trust actually is. Fortunately, we can help you develop a better understanding of trusts and how they can be used in estate planning.

Trust Basics

All trusts are formal instruments that allow the creator of the trust—called a “grantor” or “trustor”—to transfer ownership of his or her property into the trust to be managed by another person or entity—called a “trustee”—for the benefit of a third person or persons—called “beneficiaries.” Several different kinds of trusts can be used for estate planning purposes, each with its own set of rules, requirements, and potential advantages. All of them, however, are similar in structure and hold assets to be transferred at a later time—usually after the death of the grantor.

Revocable Trusts and Irrevocable Trusts

Most trusts fall into one of two primary categories. They can be either revocable or irrevocable. A revocable trust—often known as a living trust—allows for the transfer of assets, but the terms of the trust can be changed at any time while the grantor is still living. The entire trust can even be revoked; hence the name. In most cases, the grantor of a revocable trust will appoint himself or herself as the primary trustee so that he or she can remain in control of the trusts property during his or her lifetime. Upon the grantor’s death, a contingent or successor trustee will assume the role.

By comparison, an irrevocable trust cannot be changed, altered, amended, or dissolved once it is created and funded. The property that is placed in an irrevocable trust are no longer accessible to the grantor. While this may sound risky, the advantage is that assets in an irrevocable trust are essentially set aside for future generations, so they are generally not counted toward the value of the estate for tax purposes.

Probate Exemptions

One of the major benefits of using trusts is that property that is held by a trust is not usually subject to probate. Probate is the process through which a deceased person’s estate and will are validated by the court before the assets in the estate can be transferred to the person’s heirs. With a trust, the assets can bypass probate and be given directly to the beneficiaries in accordance with the terms of the trust.

Speak With a Lombard Trusts Attorney

At A. Traub & Associates, our team is equipped to help you with all types of estate planning trusts. Contact one of our experienced DuPage County estate planning attorneys to get started. Call 630-426-0196 to schedule a confidential consultation today.

Sources:

http://www.investopedia.com/terms/t/trust.asp

https://www.fidelity.com/estate-planning-inheritance/estate-planning/trusts